The Parade of Strong Data Continues
- December ADP Employment Report showed an increase of 250,000 private sector jobs.
- Initial Claims for Unemployment Insurance ticked up by 3,000 for the week ending December 30.
- Light Vehicle Sales for December were stronger than expected, at a 17.85-million-unit rate.
Private sector payrolls increased by a strong 250,000 net new jobs in December according to the ADP National Employment Report. The official payroll data from the Bureau of Labor Statistics for December will be released tomorrow morning. The strong ADP numbers are raising expectations for tomorrow. However, the BLS data does not need to follow ADP in lock step, and December is often a month when the two surveys diverge. But given the strong ADP data, and other solid labor market indicators, including unemployment insurance claims and the positive ISM Manufacturing Index employment survey for December, it looks reasonable to expect a BLS payroll number more than 200,000. This would be another good gain, consistent with ongoing U.S. economic momentum at year-end. According to ADP, resources and mining industries added 3,000 jobs in December. Construction employment was up by 16,000. Manufacturing employment increased by 9,000. Trade/transportation/utilities employment increased by 45,000 jobs. Information services cut 4,000 jobs. Financial services gained a strong 19,000. Professional and business services added a sizeable 72,000 jobs in December. Education/healthcare was up a smart 50,000. Leisure/hospitality industries added 28,000 jobs. The total government sector has been adding about 5,000 payroll jobs per month lately. We can add 5K to the ADP total to get an estimate of 255,000 payroll jobs for the month. This feels a bit rich, but is certainly a possibility. A strong gain reported tomorrow on the household employment survey could pull the U.S. unemployment rate down to 4.0 percent in December. We expect to see a three handle on the U.S. unemployment rate before mid-year.
Initial claims for unemployment insurance ticked up inconsequentially, by 3,000, for the week ending December 30, to hit 250,000. According to the Department of Labor, the claims taking process remains disrupted in the Virgin Islands and Puerto Rico. Continuing claims fell by 37,000 for the week ending December 23, to hit 1,914,000, a very low number.
Autodata says that U.S. light vehicle sales increased slightly to a 17.85-million-unit rate, up from 17.53 million in November. Vehicle sales surged in September after the hurricanes damaged vehicles from Texas to Florida. We expected sales to fall off from the September surge quicker than they have. Strong consumer confidence, buoyed by sustained economic momentum and tax reform, may be extending the rally in auto sales. We still expect to see auto sales ebb this spring to below a 17-million-unit rate.
Market Reaction: U.S. equity markets opened higher, as the DJIA cruised past 25,000. The yield in 10-Year T-bonds is up to 2.46 percent. NYMEX crude oil is up to $62.06/barrel. Natural gas futures are down to $2.96/mmbtu.
For a PDF version of this report click here: ADP_01042018.
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